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VKE
VKE
VKE - Vukile - Audited results and distribution announcement for the year ended
31 March 2009 incorporating a further cautionary announcement
VUKILE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Reg no. 2002/027194/06)
ISIN: ZAE000056370
JSE code: VKE
NSX code: VKN
("Vukile", "the group" or "the company")
AUDITED RESULTS and distribution announcement for the year ended 31 March 2009
incorporating a further cautionary announcement
- Annual distribution increased by 10.9%
- Vacancies contained at 3.2% of gross rentals
- Recurring cost to property revenue ratio reduced to
32.3% from 34.1%
- Value of portfolio exceeds R4.5 billion
1 Basis of preparation
The abridged audited financial statements for the year ended 31 March 2009 have
been prepared in terms of International Accounting Standard 34, International
Financial Reporting Standards (IFRS) and relevant sections of the South African
Companies Act 1973, as amended. The accounting policies applied are consistent
with those applied in the previous year.
The financial statements have been audited by Grant Thornton, whose unqualified
audit report is available for inspection at the company`s registered office.
2 Financial results
The group`s net profit available for distribution amounted to R289.9 million for
the year ended 31 March 2009 compared to the R264.6 million for the previous
year, an increase of 9.5%. If acquisitions and disposals are excluded, on a
"like for like" basis, group net property revenue increased by 9.2% from 2008 to
2009.
Group finance costs, net of investment income, have increased by R7.8 million,
from R114.8 million to R122.6 million, largely as a result of an increase in
long-term borrowings of R53 million utilised to finance capital expenditure.
Summary of group financial performance
March March %
2009 2008 change
Headline earnings of linked
units (Rm) 294 270 8.9
Available for distribution
(cents per linked unit) 98.09 89.55 9.5
Net asset value per linked
unit (cents) 907 890 1.9
Distribution per linked
unit (cents) 97.90 88.25 10.9
Loan to value ratio 28.5% 27.9% (2.2)
3 Distributions
The board of directors has approved a final distribution of 53.8 cents per
linked unit for the six months to 31 March 2009, an increase of 12.0% over the
comparable six month period. The distribution for the full year ended 31 March
2009 is 97.90 cents per linked unit, an increase of 10.9% over the previous
year`s distribution of 88.25 cents per linked unit.
The 9.65 cents per linked unit increase in distributions year-on-year is made up
as follows:
2009 2008
Cents Cents
per per
linked linked
unit unit
Contributions to increased
rental income
- Reduction in vacancies and
increased rentals 13.9 13.7
- Additional rentals
from prior year property
acquisition 3.4 4.2
- Additional municipal service
recoveries and other 3.4 2.0
20.7 19.9
Less: Increase in property
expenditure (9.0) (4.4)
Net increase in net group
property revenue 11.7 15.5
(Increased)/reduced net finance
costs (2.7) 4.1
Reduced/(increased) administrative
expenses, taxation and retained
income 0.65 (3.5)
Adjustment for an increase in weighted
average number of linked units
in issue - (4.6)
Net increase in distribution 9.65 11.5
4 Borrowings
The group`s long-term loans are hedged using interest rate swap agreements for
periods expiring during the next one to three years. 93% of all interest
bearing debt has been hedged at year-end at a weighted average rate of 10.3% per
annum. Changes in interest rates will, therefore, have minimal impact on the
group`s cost of debt over the next year. The group has taken advantage of the
previously inverted yield curve to enter into two forward starting interest rate
swaps to cover the R462 million debt maturing in November 2010 as follows:
- R240 million swap commencing in November 2010 and maturing in November 2015
at a rate of 8.28%. (*)
- R222 million swap commencing in November 2010 and maturing in November 2014
at a rate of 8.85%. (*)
(*) Excluding note margins
The company`s borrowing capacity is, in terms of its articles of association,
not limited. The board policy is to limit gearing to 45%. The group`s gearing
ratio at the end of the financial year was 28.5% compared to the bank and
securitisation covenants of 50% and 65% respectively. The group has unutilised
bank facilities of R419 million which, together with a corresponding 55% equity
issue, is available to fund acquisitions, developments and expansion
opportunities amounting to R931 million.
5 Group property portfolio
The property portfolio currently comprises 74 properties with a gross lettable
area of 920 232mSquared.
At 31 March 2009, the portfolio`s vacancy (measured as a percentage of gross
rentals) was 3.2% compared to 2.8% at 31 March 2008.
The largest vacancy in the portfolio is the expansion at Midrand Allandale which
reflected a vacancy at year-end of 2 922mSquared. At this stage, 2 728mSquared
of the expansion of 5 650mSquared has been let. If this vacancy is excluded,
the year end vacancy, as a percentage of gross rentals, reduces to 3%.
New leases and renewals of 186 960mSquared with a contract value of R418
million, were concluded during the year. 80% of leases that expired during the
year ended 31 March 2009 were renewed.
6 Expansions and revamps
The following expansion projects have been completed within the anticipated time
period with savings of approximately R4 million compared to the originally
approved capital outlay.
Capital Forecast
expen- initial
Date of diture yield
Property completion (R000) (%)
Oshakati
Game Centre Nov 2008 24 275 7.5
Hellman
International
(IT Courier),
Gauteng Oct 2008 14 300 9.6
Nelspruit
Truworths Oct 2008 8 700 9.5
Total 47 275 8.5
The following major revamps/income protecting capital projects are currently
underway.
Budgeted
Estimated capital
date expenditure
Property of completion (R000)
Dobsonville Shopping Centre May 2009 16 700
Durban Phoenix Plaza Apr 2009 27 300
Total 44 000
The cost of expansions, revamps and tenant installations for the year ended 31
March 2009 amounted to R92 million.
7 Valuation of portfolio
Valuations
The accounting policies of the company require that directors value the entire
portfolio every six months to fair market value. One half of the portfolio is
valued every six months, on a rotational basis, by registered independent third
party valuers.
The directors have valued the group`s property portfolio at R4.53 billion as at
31 March 2009. This is R213 million or 4.9% higher than the valuation as at 31
March 2008.
The external valuations by JHI Real Estate Limited and Old Mutual Property Group
(Pty) Ltd at 31 March 2009 of 54% of the total portfolio, amount to R131.5
million or 5.1% more than the directors` valuations of the same properties.
8 Insourcing of asset management function
Vukile announced on 3 March 2009 that its board of directors had approved the
decision to internalise Vukile`s asset management function, currently performed
by Sanlam Properties (Proprietary) Limited. At a recent general meeting the
Vukile unitholders approved the extension of the asset management contract by
six months to 30 September 2009.
In this regard, the discussions entered into between Vukile and Sanlam
Properties regarding the proposed acquisition by Vukile from Sanlam Properties
of the IT infrastructure and software, furniture and equipment and the take-on
of certain employees directly related to the asset management function of the
Vukile property portfolio as a going concern are expected to be finalised
shortly.
9 Segmental analysis
Segment assets and liabilities
Segment assets include all operating assets used by a segment and consist
principally of investment properties, receivables and cash. Assets not directly
attributable to a particular segment are allocated to the corporate segment.
Segment liabilities include all operating liabilities of a segment and consist
principally of outstanding accounts. Segment assets and liabilities do not
include deferred taxes.
Segmental analysis
Industrial Commercial
R000 R000
Group income for the year
ended 31 March 2009
Property revenue 102 785 186 147
Straight-line rental income
accrual 1 002 1 920
Property expenses (39 269) (61 317)
Net profit from property
operations 64 518 126 750
Group balance sheet at
31 March 2009
Investment properties 753 260 1 271 453
Other non-current assets 24 510 44 056
Current assets 10 001 16 553
Trade and other receivables 4 528 7 081
Cash and cash equivalents 1 786 3 089
Straight-line rental income asset 3 687 6 383
Non-current liabilities 471 646 796 117
Current liabilities 20 473 34 245
Trade and other payables 20 473 34 245
Linked unitholders - -
Taxation payable - -
Group income for the year ended
31 March 2008
Property revenue 88 643 187 468
Straight-line rental income
accrual 1 288 3 265
Property expenses (35 350) (56 558)
Net profit from property
operations 54 581 134 175
Group balance sheet at
31 March 2008
Investment properties 640 918 1 210 479
Other non-current assets 32 578 61 308
Investment properties held for
sale 53 450 -
Current assets 6 163 11 682
Trade and other receivables 2 738 5 207
Cash and cash equivalents 1 236 2 339
Straight-line rental asset 2 189 4 136
Non-current liabilities 415 478 784 698
Current liabilities 15 472 29 260
Trade and other payables 15 472 29 260
Linked unitholders - -
Taxation payable - -
Segmental analysis (continued)
Retail Corporate Total
R000 R000 R000
Group income for
the year ended
31 March 2009
Property revenue 384 353 673 285
Straight-line rental
income accrual 3 287 6 209
Property expenses (135 020) (235 606)
Net profit from
property operations 252 620 443 888
Group balance sheet
at 31 March 2009
Investment
properties 2 441 994 - 4 466 707
Other non-current
assets 65 864 11 207 145 637
Current assets 34 071 50 518 111 143
Trade and other
receivables 17 519 - 29 128
Cash and cash
equivalents 5 414 50 518 60 807
Straight-line rental
income asset 11 138 - 21 208
Non-current
liabilities 1 528 977 - 2 796 740
Current
liabilities 67 964 197 544 320 226
Trade and other
payables 67 964 37 459 160 141
Linked unitholders - 159 006 159 006
Taxation payable - 1 079 1 079
Group income for the
year ended
31 March 2008
Property revenue 336 616 612 727
Straight-line rental
income accrual 2 673 7 226
Property expenses (116 943) (208 851)
Net profit from
property operations 222 346 411 102
Group balance sheet
at 31 March 2008
Investment
properties 2 354 009 - 4 205 406
Other non-current
assets 95 804 10 294 199 984
Investment properties
held for sale - - 53 450
Current assets 27 130 32 869 77 844
Trade and other
receivables 13 894 - 21 839
Cash and cash
equivalents 4 965 32 869 41 409
Straight-line rental
asset 8 271 - 14 596
Non-current
liabilities 1 525 995 - 2 726 171
Current
liabilities 60 882 151 110 256 724
Trade and other
payables 60 882 9 200 114 814
Linked unitholders - 141 864 141 864
Taxation payable - 46 46
10 Capital commitments
The group has authorised and has contracted to the refurbishment and expansion
programmes at a combined cost of R30.3 million.
The group is authorised, but has not yet contracted, to upgrade shopping
centres, replace air-conditioning units, refurbish lifts and other minor capex
at a cost of R46 million.
11 Related party transactions
The following are related party transactions:
Amounts Amounts
owed to owed to
Amount related Amount related
paid parties paid parties
Related Type of 2009 2009 2008 2008
party transaction (R000) (R000) (R000) (R000)
Sanlam Limited
Sale of property - - 33 000 -
Sanlam Life
Insurance Limited
Lease rentals 273 - 254 -
Sanlam Properties
(Proprietary) Limited
Asset management
and other fees 14 618 1 339 16 934 1 791
Sanlam Capital
Markets Limited ("SCM")
Assumption of
company`s
conditional
financial obligations
to senior management
in terms of long-term
bonus scheme - 7 423 13 450 -
Gensec Property
Services Limited
trading as JHI
Property management
and other fees 19 470 1 024 18 062 942
Kuper Legh
Property Group
Property management
and other fees 5 291 285 5 002 346
Khulela Properties
(Proprietary) Limited
Investment fee, sales
Commission and
due diligence fee - - 2 200 -
All the above amounts due were paid in April 2009 except for the amount owing to
SCM
Sanlam Properties (Proprietary) Limited, Sanlam Life Insurance Limited and
Sanlam Capital Markets Limited are subsidiaries of Sanlam Limited which held 67
487 459 or 22.8% of the issued linked units of Vukile Property Fund Limited at
31 March 2009. Sanlam Limited also holds a minority shareholding in Gensec
Property Services Limited trading as JHI. Kuper Legh Property Group is
controlled by an individual who is also a significant unitholder in Vukile.
12 Prospects
Compared to the previous period, trading conditions have deteriorated during the
reporting period, especially during the last quarter. This is in spite of the
fact that the short-term interest rates have started to come down. Although the
lower interest rates should start to have a stimulating effect on the broad
economy, the property sector tends to lag the broad economic cycle by 12 to 18
months. This means that, although there are some indications that we have seen
the worst of the economic downturn, we can expect to see further increases in
vacancies, resistance to higher rentals and increased bad debts.
We are, however, confident that the good fundamentals of the property sector
(generally low vacancies, little new stock and huge infrastructure spending by
government), in addition to our strong focus on tenant retention, tight control
of expenses and general financial discipline, will enable us to show reasonable
growth in distribution for the year ahead.
13 Payment of debenture interest and dividend
Notice is hereby given of a distribution amounting to 53.80 cents per linked
unit for the six months ended 31 March 2009. The distribution comprises
interest on debentures of 53.69 cents per linked unit and a dividend of 0.11
cents per linked unit.
Last date to trade cum
distribution Thursday, 11 June 2009
Linked units trade ex
distribution Friday, 12 June 2009
Record date for unitholders to
participate in the distribution Friday, 19 June 2009
Payment of distribution to
unitholders Monday, 22 June 2009
Linked unit certificates may not be dematerialised or re-materialised between
Friday 12 June 2009 and Friday 19 June 2009, both days inclusive.
14 Further cautionary announcement
Unitholders are referred to the announcements dated 4 December 2008, 15 January
2009, 3 March 2009 and 14 April 2009 and are advised that the company is still
in negotiations which, if successfully concluded, may have an effect on the
price of the company`s linked units.
Accordingly, unitholders are advised to continue to exercise caution when
dealing in the company`s linked units until a further announcement is made.
ABRIDGED GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
2009 2008
R000 R000
Property revenue 673 285 612 727
Straight-line rental income
accrual 6 209 7 226
Gross property revenue 679 494 619 953
Property expenses (235 606) (208 851)
Net profit from property
operations 443 888 411 102
Administrative expenses (20 137) (20 914)
Investment and other income 8 712 9 262
Operating profit before
finance costs 432 463 399 450
Finance costs (131 358) (124 059)
Net profit before debenture
interest 301 105 275 391
Debenture interest (288 755) (260 292)
Net profit before capital
items 12 350 15 099
Capital items
Profit on sale of re-valued
properties - 11 051
Amortisation of debenture
premium 1 007 544
Negative goodwill arising
on acquisition of MICC
subsidiary - 297
Fair value adjustments 115 504 222 424
Gross change in fair value
of investment properties 121 713 229 650
Straight-line rental income
adjustment (6 209) (7 226)
Net profit before taxation 128 861 249 415
Taxation (6 297) (52 165)
Net profit 122 564 197 250
Reconciliation: Headline earnings and distributable earnings
2009
2009 Group
Group Cents per
R000 linked unit
Attributable profit after
taxation 122 564 41.47
Adjusted for:
Net change in fair value
of investment properties (115 504) (39.08)
Total tax effects of adjustments (554) (0.19)
Negative goodwill arising on an
acquisition - -
Profit on sale of re-valued
properties - -
Amortisation of debenture premium (1 007) (0.34)
Debenture interest 288 755 97.70
Headline earnings of linked units 294 254 99.56
Adjusted for:
Straight-line rental accrual net
of deferred taxation (4 348) (1.47)
Available for distribution 289 906 98.09
Total number of linked units
in issue at 31 March 295 550 877
Weighted average number of
linked units in issue 295 550 877
Earnings per linked unit
(cents) 139.17
Headline earnings per linked
unit (cents) 99.56
Reconciliation: Headline earnings and distributable earnings (continued)
2008
2008 Group
Group Cents per
R000 linked unit
Attributable profit after
taxation 197 250 66.74
Adjusted for:
Net change in fair value of
investment properties (222 424) (75.26)
Total tax effects of adjustments 46 782 15.83
Negative goodwill arising on an
acquisition (297) (0.10)
Profit on sale of re-valued
properties (11 051) (3.74)
Amortisation of debenture
premium (544) (0.18)
Debenture interest 260 292 88.07
Headline earnings of linked
units 270 008 91.36
Adjusted for:
Straight-line rental accrual
net of deferred taxation (5 362) (1.81)
Available for distribution 264 646 89.55
Total number of linked units
in issue at 31 March 295 550 877
Weighted average number of
linked units in issue 295 550 877
Earnings per linked unit
(cents) 154.81
Headline earnings per linked
unit (cents) 91.36
ABRIDGED GROUP BALANCE SHEET AS AT 31 MARCH 2009
31 March 31 March
2009 2008
R000 R000
ASSETS
Non-current assets 4 612 344 4 405 390
Investment properties 4 466 707 4 205 406
Investment properties -
at fair value 4 545 731 4 277 548
Straight-line rental income
adjustment (79 024) (72 142)
Other non-current assets 145 637 199 984
Straight-line rental income asset 57 816 57 546
Development expenditure 315 -
Furniture, fittings and computer
equipment 119 141
Available-for-sale financial assets 11 088 10 153
Derivative financial instruments - 55 845
Goodwill 76 299 76 299
Current assets 111 143 77 844
Straight-line rental income 21 208 14 596
Trade and other receivables 29 128 21 839
Cash and cash equivalents 60 807 41 409
Non-current assets held-for-sale - 53 450
Investment properties - 52 777
Straight-line rental income asset - 673
Total assets 4 723 487 4 536 684
EQUITY AND LIABILITIES
Equity and reserves 1 145 101 1 095 851
Share capital 2 956 2 956
Share premium 17 341 17 341
Reserves 1 124 804 1 075 554
Non-current liabilities 3 258 160 3 184 109
Linked debentures and premium 1 534 420 1 535 427
Other interest bearing borrowings 1 245 827 1 190 744
Derivative financial instruments 16 493 -
Deferred taxation 461 420 457 938
Current liabilities 320 226 256 724
Trade and other payables 122 682 105 614
Short-term bank finance 37 459 9 200
Taxation payable 1 079 46
Linked unitholders for
distribution 159 006 141 864
Total equity and liabilities 4 723 487 4 536 684
ABRIDGED GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
2009 2008
R000 R000
Cash flows from operating
Activities 36 854 34 118
Cash generated from operations 433 484 393 864
Finance costs (131 358) (124 059)
Investment and other income 8 712 9 262
Distribution paid (272 202) (240 136)
Taxation paid (1 782) (4 813)
Cash flows utilised in
investing activities (100 798) (225 732)
Cash flows generated from
financing activities 83 342 46 012
Net increase/(decrease) in
cash and cash equivalents 19 398 (145 602)
Cash and cash equivalents at
the beginning of the year 41 409 187 011
Cash and cash equivalents at
the end of the year 60 807 41 409
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2009
Share Non-
capital and distri-
share butable
premium reserves
R000 R000
Balance at 31 March 2007 20 297 808 072
Net income recognised
directly in equity - 62 996
Cash flow hedges - 73 898
Transferred to income
statement - (10 902)
Net profit for the year - -
Change in fair value of
investment properties - 229 650
Deferred taxation on change
in fair value of investment
properties - (46 781)
Deferred taxation on
straight-line rental accrual - (1 864)
Transfer to non-distributable
Reserves - 11 347
Dividend distribution - -
Balance at 31 March 2008 20 297 1 063 420
Net income recognised in
equity - (72 104)
Cash flow hedges - (77 101)
Transferred to income statement - 4 997
Net profit for the period - -
Change in fair value of
investment properties - 121 713
Deferred taxation on change
in fair value of properties - 554
Deferred taxation on straight-line
rental accrual - (1 861)
Fair value adjustments for
available-for-sale financial asset
net of share based payment - (621)
Dividend distribution - -
Balance at 31 March 2009 20 297 1 111 101
Abridged group statement of changes in equity for the year ended 31 March 2009
(continued)
Retained
income Total
R000 R000
Balance at 31 March 2007 7 768 836 137
Net income recognised directly
in equity - 62 996
Cash flow hedges - 73 898
Transferred to income statement - (10 902)
Net profit for the year 197 250 197 250
Change in fair value of
investment properties (229 650) -
Deferred taxation on change
in fair value of investment
properties 46 781 -
Deferred taxation on straight-
line rental accrual 1 864 -
Transfer to non-distributable
Reserves (11 347) -
Dividend distribution (532) (532)
Balance at 31 March 2008 12 134 1 095 851
Net income recognised in equity - (72 104)
Cash flow hedges - (77 101)
Transferred to income statement - 4 997
Net profit for the period 122 564 122 564
Change in fair value of
investment properties (121 713) -
Deferred taxation on change
in fair value of properties (554) -
Deferred taxation on straight-
line rental accrual 1 861 -
Fair value adjustments for
available-for-sale financial
asset net of share based payment - (621)
Dividend distribution (589) (589)
Balance at 31 March 2009 13 703 1 145 101
On behalf of the board
AD Botha G van Zyl
Chairman Chief executive
Roodepoort
25 May 2009
Registered office: 2nd floor Meersig Building, Constantia Boulevard, Constantia
Kloof, 1709.
Executive directors: G van Zyl (CEO), MJ Potts (Financial director).
Non-executive directors: AD Botha (Chairman), S Bernic, HSC Bester, PJ Cook, PS
Moyanga, JM Hlongwane, MH Serebro and UJ van der Walt
Company Secretary: EL Yates
JSE sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Ltd, Illovo, Sandton
NSX sponsor: IJG Securities (Pty) Ltd, Windhoek, Namibia
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Johannesburg
Investor and media relations: Contact Helen McKane on vukile@dpapr.com, or Tel:
011 728-4701.
Website: www.vukileprops.co.za
Date: 25/05/2009 12:15:01 Produced by the JSE SENS Department.
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